Explanation: Trade discount is the discount given to customers or debtors , which is indirectly expenses to the company . expenses are category in to nominal account .
Is discount a nominal account?
Discount received is an income for the business therefore discount received is a nominal account.
What type of account is discount account?
The discount is a nominal account. The discount expense and discount income are recorded on the debit side and credit side of the treble column cash book respectively.
What comes under nominal account?
A Nominal account is a General ledger account pertaining to all income, expenses, losses and gains. An example of a Nominal Account is an Interest Account.
What is discount account?
Discount account can be the indirect income (if received) or indirect expenses (if paid) of a business and hence, they are classified as nominal accounts.
What type of account is trade discount?
In the case of Trade discount, there is no entry made in the books of accounts of the buyer and seller. It is always deducted before any type of exchange takes place. Hence, it does not form part of the books of accounts of the business. It is usually allowed at the time of purchase.
Is discount a liability or asset?
When the buyer receives a discount, this is recorded as a reduction in the expense (or asset) associated with the purchase, or in a separate account that tracks discounts.
Is discount an operating expense?
Sales discounts (along with sales returns and allowances) are deducted from gross sales to arrive at the company’s net sales. Hence, the general ledger account Sales Discounts is a contra revenue account. Sales discounts are not reported as an expense.
Is a discount an income or expense?
Discounts allowed represent a debit or expense, while discount received are registered as a credit or income. Both discounts allowed and discounts received can be further divided into trade and cash discounts.
What are not nominal accounts?
Explanation: Option a) Outstanding Salaries A/C is the only account which is not a nominal account in the question. This is a balance sheet item and can be categorized under Personal Accounts.
Why nominal accounts are not balanced?
Nominal accounts are closed by transferring their respective balances to the Trading A/c or Profit and Loss A/c and hence they are not balanced. Whereas, Real and Personal accounts are balanced because their respective balances are carried forward to the Balance Sheet.
What is discount and its types?
Discount are classified as: Trade discount: The discount which is allowed when purchases are made in large quantity is known as trade discount. … This is called sale less trade discount. Cash discount: The discount which is allowed by the supplier for immediate payment or before the due date is known as cash discount.